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EXCEL - IDEA: XBRL DOCUMENT - Maiden Holdings, Ltd.Financial_Report.xls
EX-32.2 - EXHIBIT - Maiden Holdings, Ltd.q22014-exhibit322.htm
EX-32.1 - EXHIBIT - Maiden Holdings, Ltd.q22014-exhibit321.htm
EX-31.1 - EXHIBIT - Maiden Holdings, Ltd.q22014exhibit-311.htm
EX-31.2 - EXHIBIT - Maiden Holdings, Ltd.q22014exhibit-312.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

¬
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File No. 001-34042

MAIDEN HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)

Bermuda
(State or other jurisdiction of
incorporation or organization)
98-0570192
(IRS Employer
Identification No.)
 
 
131 Front Street, Hamilton, Bermuda
(Address of principal executive offices)
HM12
(Zip Code)

(441) 298-4900
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¬

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No   ¬

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¬
 
Accelerated filer x
 
 
 
Non-accelerated filer    ¬ (Do not check if a smaller reporting
company)
 
Smaller reporting company ¬

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes ¬ No x

As of August 4, 2014, the number of the Registrant's Common Stock ($.01 par value) outstanding was 72,877,657.






INDEX
 
 
Page
PART I - Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II - Other Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2




PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share and per share data)
 
June 30, 2014 (Unaudited)
 
December 31, 2013
 (Audited)
ASSETS
 
 
 
Investments:
 
 
 
Fixed maturities, available-for-sale, at fair value (Amortized cost 2014: $3,099,723; 2013: $3,127,792)
$
3,225,676


$
3,162,067

Other investments, at fair value (Cost 2014: $10,438; 2013: $4,522)
11,061


5,092

Total investments
3,236,737


3,167,159

Cash and cash equivalents
70,017


139,833

Restricted cash and cash equivalents
221,545


77,360

Accrued investment income
26,354


25,238

Reinsurance balances receivable, net (includes $371,691 and $299,645 from related parties in 2014 and 2013, respectively)
672,526


560,145

Prepaid reinsurance premiums
29,378


39,186

Reinsurance recoverable on unpaid losses (includes $5,983 and $7,263 from related parties in 2014 and 2013, respectively)
100,199


84,036

Loan to related party
167,975


167,975

Deferred commission and other acquisition expenses (includes $261,168 and $216,508 from related parties in 2014 and 2013, respectively)
360,179


304,908

Goodwill and intangible assets, net
88,975


90,613

Other assets
46,921


56,926

Total assets
$
5,020,806

 
$
4,713,379

LIABILITIES
 
 
 
Reserve for loss and loss adjustment expenses (includes $1,004,489 and $885,381 from related parties in 2014 and 2013, respectively)
$
2,104,660


$
1,957,835

Unearned premiums (includes $849,231 and $711,950 from related parties in 2014 and 2013, respectively)
1,224,830


1,034,754

Accrued expenses and other liabilities
107,905


110,114

Senior notes
360,000


360,000

Junior subordinated debt


126,381

Total liabilities
3,797,395

 
3,589,084

Commitments and Contingencies


 


EQUITY
 
 
 
Preference shares
315,000


315,000

Common shares ($0.01 par value; 73,845,844 and 73,595,897 shares issued in 2014 and 2013, respectively; 72,877,657,and 72,633,561 shares outstanding in 2014 and 2013, respectively)
738


736

Additional paid-in capital
575,811


574,522

Accumulated other comprehensive income
117,950


25,784

Retained earnings
217,295


211,602

Treasury shares, at cost (968,187 and 962,336 shares in 2014 and 2013, respectively)
(3,867
)

(3,801
)
Total Maiden shareholders’ equity
1,222,927

 
1,123,843

Noncontrolling interest in subsidiaries
484


452

Total equity
1,223,411

 
1,124,295

Total liabilities and equity
$
5,020,806

 
$
4,713,379

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

3


MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands of U.S. dollars, except per share data)


 
 
For the Three Months Ended June 30,

For the Six Months Ended
June 30,
 
 
2014

2013

2014

2013
Revenues:
 
 
 
 
 
 
 
 
Gross premiums written
 
$
560,008


$
535,457


$
1,282,390


$
1,250,177

Net premiums written
 
$
540,920


$
497,949


$
1,250,812


$
1,187,008

Change in unearned premiums
 
(9,024
)

15,324


(199,686
)

(185,293
)
Net premiums earned
 
531,896

 
513,273

 
1,051,126

 
1,001,715

Other insurance revenue
 
2,842


2,780


8,004


7,995

Net investment income
 
28,107


20,745


55,949


42,724

Net realized gains (losses) on investment
 
577


(53
)

665


3,230

Total revenues
 
563,422

 
536,745

 
1,115,744


1,055,664

Expenses:
 
 
 
 
 
 
 
 
Net loss and loss adjustment expenses
 
351,157


343,347


702,501


678,242

Commission and other acquisition expenses
 
157,402


143,572


303,484


275,902

General and administrative expenses
 
15,396


16,817


30,320


30,912

Interest and amortization expenses
 
7,172


9,570


15,236


19,140

Accelerated amortization of junior subordinated debt discount and issuance cost
 




28,240



Amortization of intangible assets
 
819


945


1,638


1,890

Foreign exchange and other gains
 
(934
)

(1,049
)

(1,072
)

(2,596
)
Total expenses
 
531,012

 
513,202

 
1,080,347

 
1,003,490

Income before income taxes
 
32,410

 
23,543

 
35,397

 
52,174

Income tax expense
 
495

 
212

 
1,421

 
736

Net income
 
31,915

 
23,331

 
33,976

 
51,438

Less: Income attributable to noncontrolling interest
 
(27
)

(32
)

(66
)

(59
)
Net income attributable to Maiden shareholders
 
31,888

 
23,299

 
33,910

 
51,379

Dividends on preference shares
 
(6,084
)
 
(3,094
)

(12,168
)

(6,188
)
Net income attributable to Maiden common shareholders
 
$
25,804

 
$
20,205

 
$
21,742

 
$
45,191

Basic earnings per share attributable to Maiden common shareholders
 
$
0.35


$
0.28

 
$
0.30

 
$
0.62

Diluted earnings per share attributable to Maiden common shareholders
 
$
0.34


$
0.27

 
$
0.29

 
$
0.61

Dividends declared per common share
 
$
0.11

 
$
0.09

 
$
0.22

 
$
0.18


See accompanying notes to the unaudited Condensed Consolidated Financial Statements.
 


4



MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(in thousands of U.S. dollars)


 
 
For the Three Months Ended June 30,
 
For the Six Months Ended
June 30,
 
 
2014

2013
 
2014
 
2013
Comprehensive income:
 
 
 
 
 
 
 
 
Net income
 
$
31,915

 
$
23,331

 
$
33,976

 
$
51,438

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
Net unrealized holding gains (losses) on available-for-sale fixed maturities arising during the period (net of tax of $(14) and $(43) for the three and six months ended June 30, 2014 and $26 and $33 for the three and six months ended June 30, 2013, respectively)
 
53,308

 
(83,489
)
 
91,339

 
(91,337
)
Adjustment for reclassification of net realized gains recognized in net income, net of tax
 
418

 

 
347

 
(3,081
)
Foreign currency translation adjustment
 
643

 
(1,569
)
 
477

 
1,317

Other comprehensive income (loss)
 
54,369

 
(85,058
)
 
92,163

 
(93,101
)
Comprehensive income (loss)
 
86,284

 
(61,727
)
 
126,139

 
(41,663
)
Net income attributable to noncontrolling interest
 
(27
)
 
(32
)
 
(66
)
 
(59
)
Other comprehensive loss (income) attributable to noncontrolling interest
 
3

 
(5
)
 
3

 
6

Comprehensive income attributable to noncontrolling interest
 
(24
)
 
(37
)
 
(63
)
 
(53
)
Comprehensive income (loss) attributable to Maiden shareholders
 
$
86,260

 
$
(61,764
)
 
$
126,076

 
$
(41,716
)


See accompanying notes to the unaudited Condensed Consolidated Financial Statements.



5


MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(in thousands of U.S. dollars)

For the Six Months Ended June 30,

2014

2013
Preference shares
 
 
 
 
Beginning balance
 
$
315,000

 
$
150,000

Ending balance
 
315,000

 
150,000

Common shares
 
 
 
 
Beginning balance
 
736

 
733

Exercise of options and issuance of shares
 
2

 
2

Ending balance
 
738

 
735

Additional paid-in capital
 
 
 
 
Beginning balance
 
574,522

 
575,869

Exercise of options and issuance of common shares
 
324

 
931

Share based compensation expense
 
965

 
1,160

Ending balance
 
575,811

 
577,960

Accumulated other comprehensive income
 
 
 
 
Beginning balance
 
25,784

 
141,130

Change in net unrealized gains (losses) on investments, net
 
91,686

 
(94,418
)
Foreign currency translation adjustments
 
480

 
1,323

Ending balance
 
117,950

 
48,035

Retained earnings
 
 
 
 
Beginning balance
 
211,602

 
151,308

Net income attributable to Maiden shareholders
 
33,910

 
51,379

Dividends on preference shares
 
(12,168
)
 
(6,188
)
Dividends on common shares
 
(16,049
)
 
(13,063
)
Ending balance
 
217,295

 
183,436

Treasury shares
 
 
 
 
Beginning balance
 
(3,801
)
 
(3,801
)
Shares repurchased for treasury
 
(66
)
 

Ending balance
 
(3,867
)
 
(3,801
)
Noncontrolling interest in subsidiaries
 
 
 
 
Beginning balance
 
452

 
372

Dividend paid to noncontrolling interest
 
(31
)
 
(29
)
Net income attributable to noncontrolling interest
 
66

 
59

Foreign currency translation adjustments
 
(3
)
 
(6
)
Ending balance
 
484

 
396

Total equity
 
$
1,223,411

 
$
956,761

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.


6


MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands of U.S. dollars)
For the Six Months Ended June 30,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
 
Net income
 
$
33,976

 
$
51,438

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization of intangibles
 
2,392

 
2,591

Net realized gains on investment
 
(665
)
 
(3,230
)
Foreign exchange and other gains
 
(1,072
)
 
(2,596
)
Amortization of share-based compensation expense, bond premium and discount, subordinated debt discount and accelerated amortization of junior subordinated debt discount and issuance cost, net
 
32,583

 
8,230

Changes in assets – (increase) decrease:
 
 
 
 
Reinsurance balances receivable, net
 
(110,604
)
 
(167,309
)
Prepaid reinsurance premiums
 
9,808

 
(10,219
)
Reinsurance recoverable on unpaid losses
 
(16,093
)
 
9,712

Accrued investment income
 
(1,113
)
 
(540
)
Deferred commission and other acquisition expenses
 
(55,090
)
 
(44,644
)
Other assets
 
7,200

 
7,772

Changes in liabilities – increase (decrease):
 
 
 
 
Reserve for loss and loss adjustment expenses
 
145,959

 
111,408

Unearned premiums
 
189,872

 
195,538

Accrued expenses and other liabilities
 
(1,630
)
 
(8,091
)
Net cash provided by operating activities
 
235,523

 
150,060

Cash flows from investing activities:
 
 
 
 
Purchases of fixed maturities – available-for-sale
 
(217,904
)
 
(630,576
)
Purchases of other investments
 
(6,134
)
 
(1,538
)
Proceeds from sales of fixed maturities – available-for-sale
 
109,963

 
202,486

Proceeds from maturities and calls of fixed maturities
 
133,006

 
264,264

Proceeds from redemption of other investments
 
510

 
168

(Increase) decrease in restricted cash and cash equivalents
 
(144,185
)
 
36,112

Other, net
 
(656
)
 
1,055

Net cash used in investing activities
 
(125,400
)
 
(128,029
)
Cash flows from financing activities:
 
 
 
 
Repayment of junior subordinated debt
 
(152,500
)
 

Common share issuance
 
326

 
933

Dividends paid to common shareholders
 
(16,035
)
 
(6,543
)
Dividends paid to preference shareholders
 
(12,168
)
 
(6,188
)
Net cash used in financing activities
 
(180,377
)
 
(11,798
)
Effect of exchange rate changes on foreign currency cash
 
438

 
(2,401
)
Net (decrease) increase in cash and cash equivalents
 
(69,816
)
 
7,832

Cash and cash equivalents, beginning of period
 
139,833

 
81,543

Cash and cash equivalents, end of period
 
$
70,017

 
$
89,375


See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

7

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)





1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Maiden Holdings, Ltd. and its subsidiaries (the "Company" or "Maiden") and have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP" or "U.S. GAAP") for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All significant inter-company transactions and accounts have been eliminated.

These interim unaudited Condensed Consolidated Financial Statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period and all such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative, if annualized, of those to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

These unaudited Condensed Consolidated Financial Statements, including these notes, should be read in conjunction with the Company's audited consolidated financial statements, and related notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

Certain reclassifications have been made for 2013 to conform to the 2014 presentation and have no impact on net income previously reported.

2. Significant Accounting Policies

There have been no material changes to our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2013, except as discussed below:

Recently Adopted Accounting Standards Updates

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry-forward, a Similar Tax Loss, or a Tax Credit Carry-forward Exists

On July 18, 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-11 which provides guidance on the presentation of an unrecognized tax benefit when a net operating loss ("NOL") carry-forward, a similar tax loss, or a tax credit carry-forward exists. Under this ASU, an entity must present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a NOL carry-forward, similar tax loss, or a tax credit carry-forward. There are two exceptions to this form of presentation as follows:

To the extent a NOL carry-forward, a similar tax loss, or a tax credit carry-forward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position; and

The entity does not intend to use the deferred tax asset for this purpose.

If either of these conditions exists, an entity should present an unrecognized benefit in the financial statements as a liability and should not net the unrecognizable tax benefit with a deferred tax asset.

The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The update was adopted effective January 1, 2014. The adoption of this guidance did not have an impact on our results of operations, financial condition or liquidity.

8

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)




2. Significant Accounting Policies (continued)

Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity

In March 2013, FASB issued ASU 2013-05 with the objective of resolving the diversity about whether Accounting Standards Codification ("ASC") 810-10, Consolidation - Overall, or ASC 830-30, Foreign Currency Matters - Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. Under this guidance, when a reporting entity that is also the parent entity, ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity, the parent is required to apply the guidance in ASC 830-30 to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Additionally, for an equity method investment that is a foreign entity, the partial sale guidance in ASC 830-30-40 continues to be applicable. As such, a pro rata portion of the cumulative translation adjustment should be released into net income upon a partial sale of such an equity method investment. However, this treatment does not apply to an equity method investment that is not a foreign entity. In those instances, the cumulative translation adjustment is released into net income only if the partial sale represents a complete or substantially complete liquidation of the foreign entity that contains the equity method investment.

Furthermore, the amendments in this ASU clarify that the sale of an investment in a foreign entity includes both: (1) events that result in the loss of a controlling financial interest in a foreign entity (that is, irrespective of any retained investment); and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date (sometimes also referred to as a step acquisition). Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events.

The amendments in this ASU are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The update was adopted effective January 1, 2014. The adoption of this guidance did not have an impact on our results of operations, financial condition or liquidity.

Recently Issued Accounting Standards Not Yet Adopted

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity

On April 10, 2014, the FASB issued ASU 2014-08, which amends the definition of a discontinued operation in ASC 205-20 and requires entities to provide additional disclosures about disposal transactions that both meet and do not meet the discontinued-operations criteria. Under the previous guidance, the results of operations of a component of an entity were classified as a discontinued operation if all of the following conditions were met:

The component has been disposed of or is classified as held for sale;

The operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction; and

The entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.

The revised guidance will change how entities identify disposal transactions under U.S. GAAP by eliminating the second and third criteria above for classifying operations as discontinued. The new guidance instead requires classification of a component or group of components as discontinued operations if it represents a strategic shift that has or will have a major impact on an entity’s operations or financial results.

The amendments in this ASU are effective prospectively to all disposals (or classifications as held for sale) that occur in annual periods (and interim periods therein) beginning on or after December 15, 2014. Early adoption is permitted. Entities are prohibited from applying the new ASU to any component that is classified as held for sale before the adoption date. The Company is currently evaluating the impact of the adoption of this new guidance on its consolidated results of operations and financial condition.

9

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)




2. Significant Accounting Policies (continued)

Revenue from Contracts with Customers

On May 28, 2014, FASB issued the final standard on revenue from contracts with customers. The standard, issued as ASU 2014-09, provides comprehensive guidance for entities to use in accounting for revenue arising from contracts with customers. The purpose of this ASU is to develop a common revenue recognition standard as part of the convergence between U.S. GAAP and International Financial Reporting Standard ("IFRS"). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The ASU is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016, for public entities. Early application is not permitted.

An entity should apply the amendments in this ASU using one of the following two methods on adoption:

1.
Retrospectively to each prior reporting period presented and the entity may elect any of the following practical expedients:

a.
For completed contracts, an entity need not restate contracts that begin and end within the same annual reporting period;

b.
For completed contracts that have variable consideration, an entity may use the transaction price at the date the contract was completed rather than estimating variable consideration amounts in the comparative reporting periods;

c.
For all reporting periods presented before the date of initial application, an entity need not disclose the amount of the transaction price allocated to remaining performance obligations and an explanation of when the entity expects to recognize that amount as revenue.

2.
Retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. If an entity elects this transition method it also should provide the additional disclosures in reporting periods that include the date of initial application of:

a.
The amount by which each financial statement line item is affected in the current reporting period by the application of this ASU as compared to the guidance that was in effect before the change.

b.
An explanation of the reasons for significant changes.

The Company is currently evaluating the impact of the adoption of this new guidance on its consolidated results of operations and financial condition and have not yet determined the method by which we will adopt the standard in 2017.

Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period

On June 19, 2014, FASB issued ASU 2014-12 to clarify how entities should treat performance targets that can be met after the requisite service period of a share-based payment award. The ASU states that the share-based payment award should be treated as a performance condition that affects vesting and therefore, an entity would not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which transfer to the employee is contingent on the entity’s satisfaction of a performance target until it becomes probable that the performance target will be met. No new disclosures are required under the ASU.

ASU 2014-12 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Early adoption is permitted. In addition, all entities will have the option of applying the guidance either prospectively (i.e. only to awards granted or modified on or after the effective date of the issue) or retrospectively. Retrospective application would only apply to awards with performance targets outstanding at or after the beginning of the first annual period presented (i.e. the earliest presented comparative period). The adoption of this guidance is not expected to have an impact on our results of operations, financial condition or liquidity.

10

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)





3. Segment Reporting

The Company currently has three reportable segments: Diversified Reinsurance, AmTrust Quota Share Reinsurance and the NGHC Quota Share (which is currently in run-off).

The Company evaluates segment performance based on segment profit separately from the results of our investment portfolio. Other operating expenses allocated to the segments are called General and Administrative expenses which are allocated on an actual basis except salaries and benefits where management’s judgment is applied. The Company does not allocate general corporate expenses to the segments. In determining total assets by reportable segment, the Company identifies those assets that are attributable to a particular segment such as reinsurance balances receivable, prepaid reinsurance premiums, reinsurance recoverable on unpaid losses, deferred commission and other acquisition expenses, loans, goodwill and intangible assets, restricted cash and cash equivalents and investments, and reinsurance recoverable on paid losses and funds withheld (which are both presented as part of other assets in the condensed consolidated balance sheets). All remaining assets are allocated to Corporate.

Fee-generating business, which is included in the Diversified Reinsurance segment, is considered part of the underwriting operations of the Company. To the extent that the fees are generated on underlying insurance contracts sold to third parties that are then ceded under quota share reinsurance contracts with Maiden Reinsurance Ltd. ("Maiden Bermuda", formerly known as Maiden Insurance Company Ltd.), a proportionate share of the fee is offset against the related acquisition expense. To the extent that fee business is not directly associated with premium revenue generated under the applicable reinsurance contracts, that fee revenue is separately reported on the line captioned “Other insurance revenue” in the Company's unaudited Condensed Consolidated Statements of Income.


The following tables summarize our operating segment's underwriting results and the reconciliation of our reportable segments to net income:
For the Three Months Ended June 30, 2014

Diversified Reinsurance

AmTrust Quota Share Reinsurance

NGHC
Quota Share

Total
Net premiums written

$
168,943


$
372,024


$
(47
)

$
540,920

Net premiums earned

$
200,840


$
324,926


$
6,130


$
531,896

Other insurance revenue

2,842






2,842

Net loss and loss adjustment expenses

(136,208
)

(210,680
)

(4,269
)

(351,157
)
Commission and other acquisition expenses

(56,919
)

(98,510
)

(1,973
)

(157,402
)
General and administrative expenses

(10,405
)

(514
)

(188
)

(11,107
)
Underwriting income (loss)

$
150


$
15,222


$
(300
)

$
15,072

Reconciliation to net income












Net investment income and realized gains on investment










28,684

Amortization of intangible assets










(819
)
Foreign exchange and other gains










934

Interest and amortization expenses










(7,172
)
Other general and administrative expenses










(4,289
)
Income tax expense










(495
)
Net income










$
31,915














Net loss and loss adjustment expense ratio*

66.9
%

64.8
%

69.6
%

65.7
%
Commission and other acquisition expense ratio**

27.9
%

30.3
%

32.2
%

29.4
%
General and administrative expense ratio***

5.1
%

0.2
%

3.1
%

2.9
%
Combined ratio****

99.9
%

95.3
%

104.9
%

98.0
%





11

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)





3. Segment Reporting (continued)
For the Three Months Ended June 30, 2013
 
Diversified Reinsurance
 
AmTrust Quota Share Reinsurance
 
NGHC
Quota Share
 
Total
Net premiums written
 
$
134,934

 
$
290,578

 
$
72,437

 
$
497,949

Net premiums earned
 
$
178,336

 
$
261,404

 
$
73,533

 
$
513,273

Other insurance revenue
 
2,780

 

 

 
2,780

Net loss and loss adjustment expenses
 
(120,837
)
 
(172,925
)
 
(49,585
)
 
(343,347
)
Commission and other acquisition expenses
 
(44,438
)
 
(76,198
)
 
(22,936
)
 
(143,572
)
General and administrative expenses
 
(11,153
)
 
(505
)
 
(179
)
 
(11,837
)
Underwriting income
 
$
4,688

 
$
11,776

 
$
833

 
$
17,297

Reconciliation to net income
 
 
 
 
 
 
 
 
Net investment income and realized losses on investment
 
 
 
 
 
 
 
20,692

Amortization of intangible assets
 
 
 
 
 
 
 
(945
)
Foreign exchange and other gains
 
 
 
 
 
 
 
1,049

Interest and amortization expenses
 
 
 
 
 
 
 
(9,570
)
Other general and administrative expenses
 
 
 
 
 
 
 
(4,980
)
Income tax expense
 
 
 
 
 
 
 
(212
)
Net income
 
 
 
 
 
 
 
$
23,331

 
 
 
 
 
 
 
 
 
Net loss and loss adjustment expense ratio*
 
66.7
%
 
66.2
%
 
67.4
%
 
66.5
%
Commission and other acquisition expense ratio**
 
24.5
%
 
29.1
%
 
31.2
%
 
27.8
%
General and administrative expense ratio***
 
6.2
%
 
0.2
%
 
0.3
%
 
3.3
%
Combined ratio****
 
97.4
%
 
95.5
%
 
98.9
%
 
97.6
%

12

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)



3. Segment Reporting (continued)
For the Six Months Ended June 30, 2014

Diversified Reinsurance

AmTrust Quota Share Reinsurance

NGHC
Quota Share

Total
Net premiums written

$
460,562

 
$
791,034

 
$
(784
)
 
$
1,250,812

Net premiums earned

$
400,156


$
629,848


$
21,122


$
1,051,126

Other insurance revenue

8,004






8,004

Net loss and loss adjustment expenses

(277,572
)

(410,224
)

(14,705
)

(702,501
)
Commission and other acquisition expenses

(107,760
)

(188,995
)

(6,729
)

(303,484
)
General and administrative expenses

(21,395
)

(1,062
)

(387
)

(22,844
)
Underwriting income (loss)

$
1,433


$
29,567


$
(699
)

$
30,301

Reconciliation to net income

 
 
 
 
 

 
Net investment income and realized gains on investment

 
 
 
 
 

56,614

Amortization of intangible assets

 
 
 
 
 

(1,638
)
Foreign exchange and other gains

 
 
 
 
 

1,072

Interest and amortization expenses

 
 
 
 
 

(15,236
)
Accelerated amortization of junior subordinated debt discount and issuance costs
 
 
 
 
 
 
 
(28,240
)
Other general and administrative expenses

 
 
 
 
 

(7,476
)
Income tax expense

 
 
 
 
 

(1,421
)
Net income

 
 
 
 
 

$
33,976



 
 
 
 
 

 
Net loss and loss adjustment expense ratio*

68.0
%

65.1
%

69.6
%

66.3
%
Commission and other acquisition expense ratio**

26.4
%

30.0
%

31.9
%

28.7
%
General and administrative expense ratio***

5.2
%

0.2
%

1.8
%

2.8
%
Combined ratio****

99.6
%

95.3
%

103.3
%

97.8
%

13

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)



3. Segment Reporting (continued)
For the Six Months Ended June 30, 2013

Diversified Reinsurance

AmTrust Quota Share Reinsurance

NGHC
Quota Share

Total
Net premiums written

$
402,544


$
635,396


$
149,068


$
1,187,008

Net premiums earned

$
374,585


$
481,692


$
145,438


$
1,001,715

Other insurance revenue

7,995






7,995

Net loss and loss adjustment expenses

(261,600
)

(318,570
)

(98,072
)

(678,242
)
Commission and other acquisition expenses

(89,220
)

(141,330
)

(45,352
)

(275,902
)
General and administrative expenses

(21,951
)

(994
)

(353
)

(23,298
)
Underwriting income

$
9,809


$
20,798


$
1,661


$
32,268

Reconciliation to net income

 
 
 
 
 
 
 
Net investment income and realized gains on investment

 
 
 
 
 

45,954

Amortization of intangible assets

 
 
 
 
 

(1,890
)
Foreign exchange and other gains

 
 
 
 
 

2,596

Interest and amortization expenses

 
 
 
 
 

(19,140
)
Other general and administrative expenses

 
 
 
 
 

(7,614
)
Income tax expense

 
 
 
 
 

(736
)
Net income

 
 
 
 
 

$
51,438



 
 
 
 
 

 
Net loss and loss adjustment expense ratio*

68.4
%

66.1
%

67.4
%

67.2
%
Commission and other acquisition expense ratio**

23.3
%

29.3
%

31.2
%

27.3
%
General and administrative expense ratio***

5.7
%

0.3
%

0.3
%

3.1
%
Combined ratio****

97.4
%

95.7
%

98.9
%

97.6
%

*
Calculated by dividing net loss and loss adjustment expenses by the sum of net premiums earned and other insurance revenue.

**
Calculated by dividing commission and other acquisition expenses by the sum of net premiums earned and other insurance revenue.

***
Calculated by dividing general and administrative expenses by the sum of net premiums earned and other insurance revenue.

****
Calculated by adding together net loss and loss adjustment expense ratio, commission and other acquisition expense ratio and general and administrative expense ratio.

14

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)




3. Segment Reporting (continued)

The following table summarizes our reportable segments' identifiable assets as of June 30, 2014 and December 31, 2013:
June 30, 2014
 
Diversified
Reinsurance
 
AmTrust
Quota Share Reinsurance
 
NGHC Quota Share
 
Total
Reinsurance balances receivable, net
 
$
301,165

 
$
371,361

 
$

 
$
672,526

Prepaid reinsurance premiums
 
29,378

 

 

 
29,378

Reinsurance recoverable on unpaid losses
 
100,199

 

 

 
100,199

Deferred commission and other acquisition expenses
 
99,004

 
261,060

 
115

 
360,179

Loan to related party
 

 
167,975

 

 
167,975

Goodwill and intangible assets, net
 
88,975

 

 

 
88,975

Restricted cash and cash equivalents and investments
 
1,091,474

 
1,334,771

 
85,315

 
2,511,560

Other assets
 
28,764

 

 

 
28,764

Total assets - reportable segments
 
1,738,959

 
2,135,167

 
85,430

 
3,959,556

Corporate assets
 

 

 

 
1,061,250

Total Assets
 
$
1,738,959

 
$
2,135,167

 
$
85,430

 
$
5,020,806


December 31, 2013
 
Diversified
Reinsurance
 
AmTrust
Quota Share Reinsurance
 
NGHC Quota Share
 
Total
Reinsurance balances receivable, net
 
$
260,882

 
$
278,573

 
$
20,690

 
$
560,145

Prepaid reinsurance premiums
 
39,186

 

 

 
39,186

Reinsurance recoverable on unpaid losses
 
84,036

 

 

 
84,036

Deferred commission and other acquisition expenses
 
88,482

 
209,439

 
6,987

 
304,908

Loan to related party
 

 
167,975

 

 
167,975

Goodwill and intangible assets, net
 
90,613

 

 

 
90,613

Restricted cash and cash equivalents and investments
 
1,029,537

 
1,098,409

 
103,752

 
2,231,698

Other assets
 
32,358

 

 

 
32,358

Total assets - reportable segments
 
1,625,094

 
1,754,396

 
131,429

 
3,510,919

Corporate assets
 

 

 

 
1,202,460

Total Assets
 
$
1,625,094

 
$
1,754,396

 
$
131,429

 
$
4,713,379



15

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)




3. Segment Reporting (continued)

The following tables set forth financial information relating to net premiums written and earned by major line of business and reportable segment for the three and six months ended June 30, 2014 and 2013:

For the Three Months Ended June 30,
 
2014

2013
Net premiums written
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
25,556

 
4.7
 %
 
$
16,556

 
3.3
%
Casualty
 
107,827

 
19.9
 %
 
88,793

 
17.8
%
Accident and Health
 
7,895

 
1.5
 %
 
7,080

 
1.4
%
International
 
27,665

 
5.1
 %
 
22,505

 
4.5
%
Total Diversified Reinsurance
 
168,943

 
31.2
 %
 
134,934

 
27.0
%
AmTrust Quota Share Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
198,023

 
36.6
 %
 
136,208

 
27.4
%
Specialty Program
 
56,329

 
10.4
 %
 
38,669

 
7.8
%
Specialty Risk and Extended Warranty
 
117,672

 
21.8
 %
 
115,701

 
23.2
%
Total AmTrust Quota Share Reinsurance
 
372,024

 
68.8
 %
 
290,578

 
58.4
%
NGHC Quota Share
 
 
 
 
 
 
 
 
Automobile Liability
 
9

 
 %
 
41,585

 
8.4
%
Automobile Physical Damage
 
(56
)
 
 %
 
30,852

 
6.2
%
Total NGHC Quota Share
 
(47
)
 
 %
 
72,437

 
14.6
%
 
 
$
540,920

 
100.0
 %
 
$
497,949

 
100.0
%
For the Three Months Ended June 30,
 
2014
 
2013
Net premiums earned
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
40,760

 
7.7
%
 
$
27,771

 
5.4
%
Casualty
 
125,385

 
23.6
%
 
116,838

 
22.8
%
Accident and Health
 
11,374

 
2.1
%
 
9,729

 
1.9
%
International
 
23,321

 
4.4
%
 
23,998

 
4.7
%
Total Diversified Reinsurance
 
200,840

 
37.8
%
 
178,336

 
34.8
%
AmTrust Quota Share Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
177,054

 
33.3
%
 
117,566

 
22.9
%
Specialty Program
 
44,952

 
8.5
%
 
32,115

 
6.2
%
Specialty Risk and Extended Warranty
 
102,920

 
19.3
%
 
111,723

 
21.8
%
Total AmTrust Quota Share Reinsurance
 
324,926

 
61.1
%
 
261,404

 
50.9
%
NGHC Quota Share
 
 
 
 
 
 
 
 
Automobile Liability
 
3,892

 
0.7
%
 
42,473

 
8.3
%
Automobile Physical Damage
 
2,238

 
0.4
%
 
31,060

 
6.0
%
Total NGHC Quota Share
 
6,130

 
1.1
%
 
73,533

 
14.3
%
 
 
$
531,896

 
100.0
%
 
$
513,273

 
100.0
%
    

16

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)



3. Segment Reporting (continued)

For the Six Months Ended June 30,
 
2014

2013
Net premiums written
 
Total

% of Total

Total

% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
88,137

 
7.0
 %
 
$
86,078

 
7.3
%
Casualty
 
279,581

 
22.4
 %
 
237,216

 
20.0
%
Accident and Health
 
25,117

 
2.0
 %
 
22,609

 
1.8
%
International
 
67,727

 
5.4
 %
 
56,641

 
4.8
%
Total Diversified Reinsurance
 
460,562

 
36.8
 %
 
402,544

 
33.9
%
AmTrust Quota Share Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
451,780

 
36.1
 %
 
298,226

 
25.1
%
Specialty Program
 
88,127

 
7.0
 %
 
73,615

 
6.2
%
Specialty Risk and Extended Warranty
 
251,127

 
20.1
 %
 
263,555

 
22.2
%
Total AmTrust Quota Share Reinsurance
 
791,034

 
63.2
 %
 
635,396

 
53.5
%
NGHC Quota Share
 
 
 
 
 
 
 
 
Automobile Liability
 
(525
)

 %
 
85,924

 
7.2
%
Automobile Physical Damage
 
(259
)

 %
 
63,144

 
5.4
%
Total NGHC Quota Share
 
(784
)
 
 %
 
149,068

 
12.6
%
 
 
$
1,250,812

 
100.0
 %
 
$
1,187,008

 
100.0
%

For the Six Months Ended June 30,
 
2014
 
2013
Net premiums earned
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
81,355

 
7.8
%
 
$
75,318

 
7.5
%
Casualty
 
247,272

 
23.5
%
 
233,897

 
23.4
%
Accident and Health
 
20,260

 
1.9
%
 
18,362

 
1.8
%
International
 
51,269

 
4.9
%
 
47,008

 
4.7
%
Total Diversified Reinsurance
 
400,156

 
38.1
%
 
374,585

 
37.4
%
AmTrust Quota Share Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
335,659

 
31.9
%
 
219,823

 
22.0
%
Specialty Program
 
77,805

 
7.4
%
 
65,461

 
6.5
%
Specialty Risk and Extended Warranty
 
216,384

 
20.6
%
 
196,408

 
19.6
%
Total AmTrust Quota Share Reinsurance
 
629,848

 
59.9
%
 
481,692

 
48.1
%
NGHC Quota Share
 
 
 
 
 
 
 
 
Automobile Liability
 
12,988

 
1.2
%
 
84,103

 
8.4
%
Automobile Physical Damage
 
8,134

 
0.8
%
 
61,335

 
6.1
%
Total NGHC Quota Share
 
21,122

 
2.0
%
 
145,438

 
14.5
%
 
 
$
1,051,126

 
100.0
%
 
$
1,001,715

 
100.0
%

17

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)




4. Investments

(a) Fixed Maturities and Other Investments

The original or amortized cost, estimated fair value and gross unrealized gains and losses of available-for-sale fixed maturities and other investments as of June 30, 2014 and December 31, 2013 are as follows:
June 30, 2014
 
Original or
amortized cost
 
Gross
unrealized gains
 
Gross
unrealized losses
 
Fair value
Available-for-sale fixed maturities:
 
 
 
 
 
 
 
 
U.S. treasury bonds
 
$
11,956

 
$
505

 
$

 
$
12,461

U.S. agency bonds – mortgage-backed
 
1,215,829

 
15,959

 
(19,202
)
 
1,212,586

U.S. agency bonds – other
 
7,209

 
965

 

 
8,174

Non-U.S. government bonds
 
65,755

 
3,818

 
(15
)
 
69,558

Other mortgage-backed securities
 
43,925

 
1,623

 

 
45,548

Corporate bonds
 
1,692,907

 
123,494

 
(4,564
)
 
1,811,837

Municipal bonds – other
 
62,142

 
3,370

 

 
65,512

Total available-for-sale fixed maturities
 
3,099,723

 
149,734

 
(23,781
)
 
3,225,676

Other investments
 
10,438

 
623

 

 
11,061

Total investments
 
$
3,110,161

 
$
150,357

 
$
(23,781
)
 
$
3,236,737

December 31, 2013
 
Original or
amortized cost
 
Gross
unrealized gains
 
Gross
unrealized losses
 
Fair value
Available-for-sale fixed maturities:
 
 
 
 
 
 
 
 
U.S. treasury bonds
 
$
16,622

 
$
587

 
$

 
$
17,209

U.S. agency bonds – mortgage-backed
 
1,292,032

 
11,727

 
(41,104
)
 
1,262,655

U.S. agency bonds – other
 
7,207

 
901

 

 
8,108

Non-U.S. government bonds
 
70,377

 
3,547

 
(712
)
 
73,212

Other mortgage-backed securities
 
33,676